30 September 2009
Saffron BS comments on suggestion that Northern Rock return to the mutual model
The Building Societies Association (BSA) has urged the Government to seriously consider returning nationalised lender Northern Rock to the mutual sector. Saffron Building Society concedes that there is a case for converting failed banks in to mutual organisations but cautions that careful management of the Rock's structure would be required should it return to mutual status.
The call for remutualisation comes after a report by the Centre for Mutual and Employee-owned Business at the University of Oxford found strong arguments for the move; namely promoting a diverse financial system, risk appetite, healthy competition and repaying the taxpayer.
Andy Golding, Saffron's Chief Executive explained that a return to the mutual model would be a positive step forwards for the failed bank.
He said: "Mutuals are essential to provide balance within the financial services sector. Our more cautious attitude to risk counteracts the short-termist pressures of the banking system. In addition, with mutuals serving regional and local communities, they reduce the London concentration of financial sector resources and disperse wealth and welfare to local economies. We are focused on putting members' needs first, not chasing profits for shareholders, which is key to any mutual's sustainability and longevity".
"However, Northern Rock clearly has a number of structural issues which will need refining prior to any thoughts of remutualisation. It owes the tax payer a lot of money and will need capital to function effectively. This presents a difficult balance to strike, but if profits were split between reinvestment for members' benefit and repaying the tax payer over time, operating under the mutual model could be a good move for the bank and I for one would wholly support it."
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